TMI Blog2010 (1) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... of the court was delivered by D. V. Shylendra Kumar J.- The appeal under section 260A of the Income-tax Act, 1961 (for short, "the Act") relating to the assessment year 1985-86. 2. The assessee is a partnership firm. This appeal is directed against the order dated May 30, 2008 (copy at annexure A), passed by the Income-tax Appellate Tribunal (for short, "the Tribunal") in Appeal No. 850/Bang/2005 which is sought to be examined on the following questions of law said to be arising in the course of the impugned order and on the premise that the questions have been erroneously decided by the Tribunal : "1. Whether the Tribunal was justified in holding that the provisions of section 254(2) of the Act were not applicable to apply the ratio of the jurisdictional High Court rendered in a judgment subsequent to the delivery of the order of the Tribunal ? 2. Whether the ratio laid down by the jurisdictional High Court in the judgment was not law in existence forever within the jurisdiction of the High Court to be applied by the authorities subordinate as held by the hon'ble Supreme Court in the case of Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 ? 3. Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he jurisdiction of this court. 8. The brief facts leading to the filing of the present appeal has its origin to the return of income filed by the appellant-firm, way back on June 21, 1985, relating to the assessment year 1985-86. This return of income was filed by the assessee, claiming income of the firm to be not beyond taxable limits has been accepted, in terms of the assessment order dated March 28, 1988. In the result, the tax liability had been determined to be nil. 9. The only significant aspect of the return is that the firm itself had been constituted in terms of partnership deed dated November 29, 1981, comprising six partners and also indicating the profit and loss ratio of the partners, apart from spelling out the activities of the firm. The activity of the firm was to purchase immovable property by name "Ranga Bhavan", located in Mangalore, to develop and sell the said property. This activity constituted business activity. 10. The firm in terms of its partnership deed dated November 29, 1981, had purchased property on July 21, 1982 for a consideration of Rs. 30 lakhs. Subsequently, it appears that the firm was reconstituted on February 2, 1985, to admit one more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely, Ranga Bhavan by the firm and it constituted business profit. 15. The Tribunal having opined that individual partners cannot be subjected to tax, unless the firm itself in the first instance was subjected to tax, thought it fit to set aside the order of Commissioner and cancelled the order. 16. This order of the Tribunal dated June 12, 1998 found in the appeal papers at annexure B has attained finality, neither the assessee nor the Revenue has chosen to question the order. 17. The assessing authority having chosen to issue show-cause notice during November, 1998, purporting to be sequel to the appeal order passed in the five appeals of the individual partners of the firm and styling the show-cause notice as one under sections 148 and 150(1) of the Act, the appellant-firm responded to the notice by filing the reply dated November 23, 1998, and questioned the very jurisdiction for reopening of the assessment of the firm on the basis of assessment of the firm and for issuing notice under section 148 read with section 150(1) of the Act. 18. The assessee contended that the notice was bad in law ; that the assessing authority had not understood the scope and true contents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, the present appeal under section 260A of the Act by the assessee. 23. The submission of Sri Dinesh, learned counsel for the appellant is that the impugned order of the Tribunal suffers from many errors of law ; that the Tribunal failed to take notice of the fact that the assessee, namely, the firm, was not a person, who had been heard before the Tribunal, while the Tribunal passed a common order in the five appeals filed by the individual partners of the erstwhile partnership firm ; the firm being not a party to the order dated June 12, 1998, copy produced at annexure B, it was incumbent upon the Tribunal to give an opportunity of hearing to the firm before passing a common order and it had not been done. The submission is that such an order is passed to reassess the concluded assessment of the firm and that the order of the Tribunal is not a direct result of any appeal or revision proceeding, which is pursued either by the firm or in the name of the firm and in this view of the matter, the Tribunal has committed an error in holding that the assessing authority had assumed jurisdiction very correctly to pass an order in terms of section 150 of the Act. 24. That apart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (3), any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purpose of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained, in the said order, provided such other person was given an opportunity of being heard before the said order was passed." 26. The submission of Sri Dinesh, learned counsel for the assessee is that based on these statutory provisions, in the first instance, the Tribunal has committed an error in proceeding to make observations, which could possibly give rise to an order or enable the assessing authority to pass an order in terms of section 150(1) and, secondly, the assessing authority also has committed an error in issuing notice, invoking the provisions of section 148 of the Act when without any dispute, the period of limitation in terms of clause (b) of sub-section (1) of section 149 of the Act was over, i.e., long after expiry of four years from the end of the relevant assessment year, namely, 1985-86. The provisions of section 149(1) of the Act, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Tribunal, reversing the findings of the Commissioner, who had expressly set aside the assessment order of the assessing authority as initially passed, accepting the nil income return filed by the firm. 30. In this state of affairs, it cannot be said that the Tribunal has committed any error in allowing the appeal of the Revenue and restoring the assessment order passed by the assessing authority and set aside the order of the Appellate Commissioner. In this view of the matter, question No. 3 has to be necessarily answered against the assessee and in favour of the Revenue. 31. We have also examined questions Nos. 4 and 5 as raised in the memorandum of appeal and in the wake of our answers above, particularly holding that the Tribunal was very correct in affirming the view taken by the Commissioner on ascertainment of profit and income of the firm, based on the valuation method adopted by the Commissioner. These questions also are to be answered against the assessee and in favour of the Revenue, in the affirmative, particularly question No. 4 as framed does not arise in its form, as this is not a question of any addition to the income already determined, but only re-dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s judgment does not advance the case of the present appellant in any manner to answer the question in favour of the appellant-assessee. Therefore, these two questions are also answered against the assessee and in favour of the Revenue and question No. 1 is answered in the affirmative and question No. 2 is answered in the negative. In the circumstances, there is nothing else left for us to answer, warranting admission of this appeal for further examination and accordingly, this appeal is dismissed. 36. To our surprise, neither the learned counsel for the assessee nor the learned junior standing counsel appearing for the Revenue were in a position to inform us as to the manner in which the consequences of the assessing order resulted in tax liability of Rs. 7,94,250 in the hands of the firm has been followed up in the hands of the respective partners, who are partners of the firm and who had apportioned the profit in the ratio in terms of the partnership deed, as it prevailed at the relevant point of time. While we are of the view that the assessing order should have been necessarily followed up for reopening the assessment of the partners to bring to tax respective income in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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